October 24, 2020

Volume X, Number 298


October 23, 2020

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October 22, 2020

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October 21, 2020

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FCA sets out expectations of insurers after BI test case

The Financial Conduct Authority (“FCA“) has just responded to the recent High Court judgement in the Business Interruption (“BI”) test case with a “Dear CEO” letter, which sets out the steps insurers must take over the coming weeks and months. On 15 September, the High Court ruled mostly in favour of the FCA in its test case on insurance cover for BI losses incurred during the COVID-19 pandemic, and subsequent lockdown.


In the FCA’s letter, Christopher Woolard (Interim Chief Executive of the FCA) confirms that the purpose of the test case was to achieve clarity for policyholders and insurers, and that the judgment is a “critical step” towards obtaining this.

The FCA explains that when dealing with evidence applicable to claims, including of proximity and prevalence for ‘disease’ coverage clauses, insurers are expected to take a “pragmatic, transparent and consistent approach”. Further guidance on this will be published in the coming weeks.

Where insurers believe that the judgment gives them sufficient clarity to conclude their claims process with their customers, they should do so “as quickly as possible”. The FCA re-iterates that their objective remains to ensure that “slow payment does not exacerbate financial pressures on policyholders”, and notes that insurers should look to make interim payments wherever possible.

In addition, the FCA expects insurers to progress claims even where their outcome may be determined by any appeal, to ensure such claims can be paid as soon as possible following the conclusion of such an appeal. To do so, insurers should analyse the scope of any appeal and consider Chapters 5 & 7 of the FCA’s BI test case Guidance published in June.

Insurers are also reminded of the FCA’s August 2020 statement, and should consider on a case-by-case basis how appropriate it is to make deductions from claims payments for Government support that policyholders may have received.

Finally, insurers are encouraged to communicate both with policyholders and with the FCA. Insurers should “provide the clearest information that they are able to at the earliest opportunity” to policyholders, and in any event should have provided at least an initial update by 22 September 2020 per Chapter 6 the FCA’s Guidance. The FCA should also be informed of any updates to information previously provided to them.


The key themes that insurers should take from this “Dear CEO” letter are those of speed and of transparency. The High Court has scheduled a consequentials hearing for 2 October to hear submissions from parties on applications for potential appeals.

© Copyright 2020 Squire Patton Boggs (US) LLPNational Law Review, Volume X, Number 269



About this Author

Garon Anthony Litigation Attorney Squire Patton Boggs Birmingham, UK

Garon is a partner in the Litigation Practice Group. He advises clients across the full range of commercial dispute issues, including cyber liability/data breach, professional negligence, banking, pensions and insurance.

Garon regularly acts for clients who are subject to investigations or disciplinary proceedings by national and international regulators, including most recently the Financial Conduct Authority, the Financial Reporting Council and the Dubai Financial Services Authority.

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Rose Chaudry, Squire Patton, Commercial Litigation Lawyer, Tortious Contracts Attorney

Rose Chaudry is an associate in the Litigation team with expertise in general commercial litigation. Rose qualified in September 2015 after completing her training contract with the firm.

Rose regularly acts for a diverse client base, including individuals and companies, from SMEs to PLCs. Rose has experience advising on a wide-range of matters of both a contractual and tortious nature, including breach of contract, breach of warranty, debt recovery, professional negligence and insurance.

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